Microsoft plans to release cloud-based component of Office 2010:

microsoft-cloud-based-office-2010Microsoft’s unveiling of the free Office Web applications comes as Google and its free Web-based Google Docs offering continues to woo away once-paying Microsoft Office users. Industry analysts said Microsoft’s free Office Web offering is a chance for the software giant to regain some of the users it lost to Google while also re-establishing its dominance in the productivity software space.

Microsoft’s opportunity to one-up Google by offering a much better product. The full Office 2010 suite will hit the streets in the first half of next year. When Office Web goes live, it will offer stripped-down versions of Word, Excel, PowerPoint and OneNote in the cloud. Users will be able to access the applications directly through Microsoft’s Windows Live portal, and they will launch directly within a browser.
Google’s initiative is forcing Microsoft to change its business model. Google had Microsoft painted into a corner, and the only way it could respond to Google Apps and Google Docs was to offer a free application suite of its own.

And while Microsoft is taking aim at Google and reclaiming its turf, Microsoft offering free Web-based applications has some industry watchers wondering how Microsoft will make money with free software via Office Web. It’s the age-old question of why buy the cow when the milk is free.

During the first three quarters of fiscal 2009, Microsoft’s software division, which includes Office products, made $9.3 billion in profit from $14.3 billion in sales, with Office representing the majority of those sales.

Microsoft has said that the free version of Office 2010 via Office Web won’t give users all of the same features and functions they would receive if they purchased the desktop-based software, which will run from about $70 to $350 depending on the version. Microsoft said Office 2010 will feature video editing in PowerPoint and image manipulation in Word, two features that the free version will not offer.